{"id":365613,"date":"2021-11-11T19:44:00","date_gmt":"2021-11-11T16:44:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/outside-the-box-ges-ceo-could-make-a-fortune-when-the-company-splits-into-3\/"},"modified":"2021-11-11T19:44:00","modified_gmt":"2021-11-11T16:44:00","slug":"outside-the-box-ges-ceo-could-make-a-fortune-when-the-company-splits-into-3","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/outside-the-box-ges-ceo-could-make-a-fortune-when-the-company-splits-into-3\/","title":{"rendered":"#Outside the Box: GE\u2019s CEO could make a fortune when the company splits into 3"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a406fea1fe1b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a406fea1fe1b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/outside-the-box-ges-ceo-could-make-a-fortune-when-the-company-splits-into-3\/#Larry_Culps_employment_contract_guarantees_it\" >Larry Culp\u2019s employment contract guarantees it<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/outside-the-box-ges-ceo-could-make-a-fortune-when-the-company-splits-into-3\/#Rosanna_Landis_Weaver\" >Rosanna Landis Weaver<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Outside the Box: GE\u2019s CEO could make a fortune when the company splits into 3<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Larry_Culps_employment_contract_guarantees_it\"><\/span>\n  Larry Culp\u2019s employment contract guarantees it<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\" role=\"region\" aria-label=\"article body\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000482517\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000482517\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       GE plans to split the conglomerate into three companies focused on aviation, healthcare and energy. We can\u2019t know the ultimate outcome of such a split, but there is one absolute certainty: CEO Larry Culp will have extraordinary financial gains.<\/p>\n<p> We know this is a certainty because Culp has an employment contract that guarantees it. It fits with how GE<br \/>\n        GE,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208495069\/composite\" class=\"negative\">-0.38%<\/bg-quote><br \/>\n       has behaved for decades: executives have accumulated wealth regardless of how shareholders fared.<\/p>\n<div class=\"paywall\">\n       The most recent <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/Archives\/edgar\/data\/0000040545\/000120677421000774\/ge3816561-def14a.htm#CompensationActionsfor2020\" class=\"icon none\">proxy statement<\/a> filed with the SEC in March 2021 lists Culp\u2019s total compensation for 2020 as $73,192,032, almost all from two stock awards. That includes a decision by the board in August 2020 to amend Culp\u2019s\u00a0contract to extend it and offer more performance shares at lower thresholds. Yes, some of the pay is not guaranteed because of vesting requirements. Such awards are theoretically designed to encourage long-term focus and are therefore considered \u201cat risk,\u201d particularly if the goals are rigorous, which they were not in this case. \u00a0<\/p>\n<p>Culp will be awarded between 4.6 million shares and 13.9 million shares, with vesting based on whether GE\u2019s\u00a0highest average closing price for any 30 consecutive trading days between Aug. 18, 2020 and Aug. 17, 2024 hits specific trading values, with a threshold, target and maximum payments.<\/p>\n<p>However, the targets were set so low that GE\u2019s stock price has already crossed the threshold that gives him the lowest number \u2014 not because of anything particular Culp had done but because GE\u2019s stock price has <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly tracked the bull market. If the stock maintains its current level for a few more weeks, Culp will be awarded the targeted number of shares. (He won\u2019t officially get the shares until the end of his contract, which will also affect their ultimate value.)<\/p>\n<p>Most shareholders are far too lax on executive compensation, too often rubber-stamping pay packages. I know, because I spend my days looking at executive compensation packages as well as shareholder guidelines and voting practices. GE has made <em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.asyousow.org\/ceo-pay-reports\" class=\"icon none\">As You Sow\u2019s<\/a><\/em> of companies with overpaid CEOs in six out of the last seven years, beginning with the 2016 report that covers 2014 compensation. And GE\u2019s stock has been a money-loser; from Jan. 1, 2014, when Jeffrey Immelt was still CEO, through Monday, before GE announced the plans for the three-way split, its stock plummeted 48 %. The S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"positive\">+0.28%<\/bg-quote><br \/>\n       climbed 156%. <\/p>\n<div data-layout=\"inline\n                \" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n            inline\n  article__inset\n          article__inset--type-InsetMediaIllustration\n            article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:67.28571428571428%;\" data-subtype=\"photo\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-432820?width=540&amp;size=1.4849187935034802 540w, https:\/\/images.mktw.net\/im-432820?width=620&amp;size=1.4849187935034802 620w, https:\/\/images.mktw.net\/im-432820?width=639&amp;size=1.4849187935034802 639w, https:\/\/images.mktw.net\/im-432820?width=700&amp;size=1.4849187935034802 700w, https:\/\/images.mktw.net\/im-432820?width=700&amp;size=1.4849187935034802&amp;pixel_ratio=1.5 1050w, https:\/\/images.mktw.net\/im-432820?width=700&amp;size=1.4849187935034802&amp;pixel_ratio=2 1400w, https:\/\/images.mktw.net\/im-432820?width=700&amp;size=1.4849187935034802&amp;pixel_ratio=3 2100w\" sizes=\"(max-width: 639px) 100vw, (max-width: 979px) 620px, (max-width: 1299px) 540px, 700px\" src=\"https:\/\/images.mktw.net\/im-432820?width=700&amp;height=471\" alt=\"\" title=\"\">\n      <\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\">\n      <\/figcaption><\/figure>\n<\/p><\/div>\n<p>       SOC Investment Group, which works with pension funds at four unions and \u00a0was then known at CtW Group, argued in <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/Archives\/edgar\/data\/0000040545\/000137773921000011\/ge21voteno.htm\" class=\"icon none\">a letter<\/a> ahead of the 2021 annual meeting that Culp\u2019s award could be worth \u201ca staggering $232.5 million at maximum. Astonishingly, the threshold performance hurdle is 12% lower than the stock price when Mr. Culp was hired\u201d in October 2018.<\/p>\n<p>More than 57% of GE shareholders voted against that pay package. Yet the vote is non-binding and came after the contract was signed. Will GE\u2019s directors make more cautious compensation decisions going forward? We hope so, but that remains to be seen.<\/p>\n<p>Now Culp could make even more. All companies are required to include in their proxy statements executives\u2019 potential termination payments. Executives tend to get the \u00a0biggest packages during change-in-control transactions, which can be either a sale or a spinoff. In its proxy statement the company estimated that if a change in control had taken place on Dec. 31, 2020, Culp\u2019s performance awards would have been worth more than $100,389,802.<\/p>\n<p>Whether GE\u2019s plans to split into three companies will be a change in control may depend in part on whether \u201cmore than 50% of the surviving entity is controlled by the shareholders im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>tely prior to such event, in substantially the same proportions as their ownership immediately prior to the event.\u201d <\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>If it is considered a change in control, GE\u2019s proxy statement explains that under Culp\u2019s contract \u00a0a variety of calculations will be made and the one that awards the CEO the highest payment \u2013\u201cthe greatest of\u201d according to the company \u2014 will be the one chosen. That \u00a0\u201cthe greatest of\u201d clause speaks volumes not just about GE but about the distorted values <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>arent in compensation.<\/p>\n<p>Not only has GE provided excessive executive compensation to its CEOs, but its pay packages have helped fuel pay raises at other major companies. The use of peer benchmarking to pump up pay is a well-documented component of executive pay increase. Given the number of industries GE was in, many companies could and did list it as a peer comparison.\u00a0 Any company that did so had cover for increasing their own CEO\u2019s pay.<\/p>\n<p>Stock splits, buybacks, and spin-offs all affect a company\u2019s stock price. The stock market responded favorably to GE\u2019s latest plans. Shareholders who bought the stock at \u00a0recent lows may be satisfied, and any shareholder is happy to see the price increase. But many institutional investors \u00a0have likely held shares in their portfolio for many years. GE\u2019s stock price was at its highest in August 2000, and at close on Tuesday was still just 25% of that price (after taking into account the 1-for-8 reverse split in August).<\/p>\n<p>\u00a0Executive compensation is a distorted system, and GE is just one example. Given all this, does Larry Culp deserve to receive such astonishing compensation\u00a0for splitting up GE? To me and many other shareholders, the answer is no.<\/p>\n<p><em>Rosanna Landis Weaver is the program manager for the wage justice and executive pay program at <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.asyousow.org\/\" class=\"icon none\">As You Sow<\/a>, a nonprofit organization that promotes environmental and social corporate responsibility through shareholder advocacy. Follow her on Twitter <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/LandisWeaver\" class=\"icon none\">@LandisWeaver<\/a>.<\/em><\/p>\n<p><strong>More opinion:<\/strong> Why GE\u2019s tax-free split could power the stock higher and reward patient investors<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Rosanna Landis Weaver\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Rosanna_Landis_Weaver\"><\/span>Rosanna Landis Weaver<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-775C-D58D9503AFA3%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Outside the Box: GE\u2019s CEO could make a fortune when the company splits into 3&#8221; Larry Culp\u2019s employment contract guarantees it GE plans to split the conglomerate into three companies focused on aviation, healthcare and energy. We can\u2019t know the ultimate outcome of such a split, but there is one absolute certainty: CEO Larry Culp&#8230;<\/p>\n","protected":false},"author":1,"featured_media":365614,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.mktw.net\/im-433210\/social","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-365613","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/365613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=365613"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/365613\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/365614"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=365613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=365613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=365613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}